Another crypto firm has filed for bankruptcy as the fall-out from FTX’s crash continues.
Blockfi, which was bailed out by Sam Bankman-Fried’s FTX earlier this year, owed money to more than 100,000 customers.
It allowed users to buy and trade cryptocurrencies such as bitcoin on its platform.
Blockfi, which was bailed out by Sam Bankman-Fried’s FTX earlier this year, owed money to more than 100,000 customers
Similar to the way in which a traditional bank operates, it would then lend their money to businesses and individuals, and pay interest to its depositors in crypto.
But it stopped allowing customers to withdraw their cash and paused lending in the aftermath of crypto exchange FTX’s implosion this month.
Now it has filed for bankruptcy in the US in a ‘reorganisation plan that maximises value for all stakeholders, including our valued clients’.
Monsur Hussain, of credit ratings agency Fitch, said the bankruptcy ‘underscores significant asset contagion risks associated with the crypto ecosystem, and, potentially, deficient risk management processes’.
Blockfi was left floundering after loans to hedge fund Three Arrows Capital turned sour when the firm collapsed amid sliding crypto markets.
Bankman-Fried, who was then seen as the ‘king of crypto’, stepped in, extending a loan of up to £333million to Blockfi in return for the option to buy it. But following FTX’s downfall, Blockfi was left teetering.
Earlier this month, it said it had ‘significant exposure to FTX and associated corporate entities that encompasses obligations owed to us by Alameda, assets held at FTX.com, and undrawn amounts from our credit line with FTX.US’.
The collapse of Blockfi will come as a blow to yet more high-profile investors. Valar Ventures, a venture capital firm backed by billionaire Peter Thiel, owned a 19 per cent stake.
Court filings show Blockfi owed £230million to FTX, and £25million to the US financial regulator, which found this year that it failed to properly register products and misled users about risk levels.
